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Geometric and long run aspects of Granger causality

This paper extends multivariate Granger causality to take into account the subspaces along which Granger causality occurs as well as long run Granger causality. The properties of these new notions of Granger causality, along with the requisite restrictions, are derived and extensively studied for a wide variety of time series processes including linear invertible process and VARMA. Using the proposed extensions, the paper demonstrates that: (i) mean reversion in L2 is an instance of long run Granger non-causality, (ii) cointegration is a special case of long run Granger non-causality along a subspace, (iii) controllability is a special case of Granger causality, and finally (iv) linear rational expectations entail (possibly testable) Granger causality restriction along subspaces.

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File URL: http://www.econ.upf.edu/docs/papers/downloads/1356.pdf
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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1356.

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Date of creation: Jan 2013
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Handle: RePEc:upf:upfgen:1356
Contact details of provider: Web page: http://www.econ.upf.edu/

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  1. Florens, J P & Mouchart, M, 1982. "A Note on Noncausality," Econometrica, Econometric Society, vol. 50(3), pages 583-91, May.
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  20. Al-Sadoon, M.M., 2009. "Causality Along Subspaces: Theory," Cambridge Working Papers in Economics 0919, Faculty of Economics, University of Cambridge.
  21. Yamamoto, Taku & Kurozumi, Eiji, 2003. "Tests for Long-Run Granger Non-Causality in Cointegrated Systems," Discussion Papers 2003-12, Graduate School of Economics, Hitotsubashi University.
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